Basics Of Supply Chain Management

Session 1
Introduction to Supply Chain Management
Course Objectives

 Provide a review of the fundamentals of

supply chain management

Provide a basis for further study leading to
APICS certification

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Basics of Supply Chain Management

Definitions and concepts for


Planning and controlling

Flow of materials
– into, through, and out of an organization
– from initial raw materials to the ultimate
consumption of the finished product

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Course Outline
Session 1: Introduction to Supply Chain Management
Session 2: Forecasting
Session 3: Master Planning
Session 4: Material Requirements Planning
Session 5: Capacity Management and Production
Activity Control
Session 6: Inventory Fundamentals
Session 7: Inventory Management
Session 8: Physical Distribution
Session 9: Quality Management and Purchasing
Session 10:Just-in-Time Manufacturing
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Session 1 Objectives

 Role and importance of manufacturing


Conflicts in traditional systems

Role, objectives, and responsibilities of
materials management
 Differences among manufacturing

processes

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Session 1 Objectives (cont.)

 Importance of planning

Planning and control system

Planning hierarchy
 Manufacturing resource planning (MRP II)

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Wealth Creation

 What is wealth?

Where does wealth
come from?
 How can we increase

our wealth?

How can we add value?

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External Environment

 World competition

Quality

Customer
expectations

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Customer Expectations

Characteristics that provide value to the

customer

Price

Quality
 Delivery

 Pre- and post-sale service


Flexibility (product and volume)

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Customer Expectations (cont.)

 Order qualifiers
Competitive characteristics needed to be a viable
competitor
Opinion: O. Qualifiers GS mungkin lebih unggul
dari CBI
 Order winners
Competitive characteristics that cause customers
to choose firm’s products and services
Opinion:Tetapi CBI bisa menjadi O. Winners bagi
customer
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Customer Expectations (cont.)

Meeting customer expectations requires

good communications

Understanding customer needs

Two-way communication
 Working with customers to solve design

and production problems

 Freeness and openness

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Business Strategy

 To meet customer expectations, a

company must be market oriented.

All functions in a business must support
this concept.
 Operations must be tuned to meet the

needs of the marketplace.

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Lead Time
“A span of time required to perform a process”
—APICS Dictionary
Delivery lead time

“The time from the receipt of a customer order to the
delivery of the product”
—APICS Dictionary
Cumulative lead time
 “The longest planned length of time to accomplish the
activity in question”
—APICS Dictionary

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Manufacturing Strategies
Delivery Lead Time

Engineer-
Design Purchase Manufacture Assemble Ship
to-Order

Delivery Lead Time

Make-to-
Inventory Manufacture Assemble Ship Order

Delivery Lead Time

Assemble-
Manufacture Inventory Assemble Ship to-Order

Delivery Lead Time

Make-to-
Manufacture Assemble Inventory Ship
Stock
Reprinted with permission, J.R. Tony Arnold, Introduction to Materials Management, Prentice­Hall.
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A Typical Manufacturing Organization

C h ie f E x e c u t iv e
O f f ic e r

M a r k e t in g E n g in e e r in g H um an I n f o r m a t io n F in a n c e M a n u f a c t u r in g Q u a lit y
a n d S a le s R e s o u rc e s S y s te m s

R e s e a rc h a n d M a n u f a c t u r in g
D e v e lo p m e n t E n g in e e r in g

P ro d u c t
D e s ig n P r o d u c t io n M a t e r i a ls
M anagem ent

Industrial
Engineering

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Traditional “Silo” Organizations

M P
E A F
R
N R S I
O
G K A N Q
D
I E L A U
U
N T E N A
C
E I S C L
T
E N E I
I
R G T
O
I Y
N
N
G

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Basic Supply Chain

Dominant flow of products and services

Dominant flow of demand and design information

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Physical Supply/Distribution

Movement of goods from suppliers to the beginning

of the production process and from the end of the
production process to consumers

Activities
 Transportation
 Distribution inventory
 Warehousing

Packaging

Materials handling
 Order entry
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Company Objectives

Profit = Revenue – Expense

 Best customer service

Lowest production costs

Lowest inventory investment
 Lowest distribution costs

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 Conflicts in Traditional Supply Systems

Marketing Operations Finance

Increase revenue Reduce Increase profit and
Traditional
manufacturing cost cash flow, reduce
Objective
investment
This implies
1 4 7
Customer service

2 5 8
Production efficiency

3 6 9
Inventory investment

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Role of Materials Management

Demand Resourc
es
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Manufacturing Planning and Control

Involves

Production planning

Implementation and control
 Inventory management

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Manufacturing Processes

Manufacturing Processes

Product Layout Process Layout Project Layout

Continuous Repetitive Intermittent Production

Production Production (Job Shop)

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Product Layout

 Workstations in sequence needed to make

product

Work flows at a nearly constant rate
 Little work-in-process inventory
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Characteristics of Product Layout

 Limited range of similar products


Dedicated workstations

Sufficient demand
 Capital intensive

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Advantages of Product Layout

 Little work-in-process inventory


Short throughput and manufacturing lead
times
 Lower unit cost

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Process Layout

Reprinted with permission, J.R. Tony Arnold, Introduction to Materials Management, Prentice-Hall.

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Characteristics of Process Layout

 Intermittent lot production


Many different parts processed at
workstations
 General-purpose machinery

 Similar types of skills and equipment in

each department

Work moves only to required stations

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Characteristics of Process Layout

 Relatively easy to change product or

volume

Complex and expensive production and
inventory control
 High work-in-process inventory levels


Longer lead times

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Product Layout vs. Process Layout

Product Process
Capital cost
Flexibility
Annual setup cost
Run cost
Work-in-process inventory
Production and inventory control
costs
Lead time

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Characteristics of Project Layout

 Used for large, complex projects


Project remains in one location for
assembly
 Avoids cost of moving the product

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Why Plan?

To satisfy customer demand and ensure

the availability of resources

Material

Capacity

Demand Resources

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 A Good Planning and Control System

What must
we get
and
when?

These are questions of priority and capacity.

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 Planning and Control Hierarchy
Priority Management Capacity Management
Techniques Techniques

Resource
Production
Plan
Planning
(RP)
At each level, there
are three questions:
Master
Production
Rough-Cut
Capacity
 What are the
Schedule Planning (RCCP)
priorities?
 What capacity is
Material
Requirements
Capacity
Requirements
available?
Planning (MRP) Planning (CRP)

How can differences
Input/Output
be resolved?
Production Control
Activity Control
(PAC) Operation
Sequencing
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Manufacturing Resource Planning (MRP II)

“A method for the effective

planning of all resources of a
manufacturing company”
—APICS
Dictionary

Objective: to integrate the

resources of an organization
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Session 1: Objectives

 Describe the role and importance of manufacturing in our

economy
 Understand the conflicts in traditional systems

Understand the role, objectives, and responsibilities of
materials management

Understand the differences among the various
manufacturing processes
 Recognize the importance of planning
 Describe a planning and control system
 Understand the planning hierarchy

Define manufacturing resource planning (MRP II)
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